Optronic Technologies, Inc. v. Ningbo Sunny Electronic Co., Ltd.

Background

A jury found Ningbo Sunny and two subsidiaries liable for various antitrust claims. The subsidiaries entered bankruptcy proceedings. The stay of enforcement under Federal Rule of Civil Procedure 62(a) lifted on January 6, 2020. Optronic Technologies, Inc.—called “Orion” in the opinion—then filed a motion for assignment and turnover and an application for an immediate restraining order. The court had issued writs of execution against Ningbo Sunny, and Ningbo Sunny had neither posted a bond to stay enforcement under Rule 62(b) nor paid the judgment.

Assignment request

Federal Rule of Civil Procedure 69(a)(1) generally requires execution procedures to follow the law of the state where the federal court is located, unless a federal statute applies. Under California law, a court may order a judgment debtor to assign all or part of a right to payment owed or to become owed. The court explained that an assignment order may reach assignable property such as accounts receivable, but only to the extent needed to satisfy the money judgment.

Orion sought assignment of accounts receivable or other payments owed to Ningbo Sunny by 58 entities. Orion identified the entities using publicly available United States Customs information showing imports from Ningbo Sunny. Ningbo Sunny responded that it had a current sales relationship with only nine of the entities and current United States accounts receivable with only five.

The court found that Orion had not carried its evidentiary burden as to the 53 entities without current United States accounts receivable. It granted the assignment request as to the five entities with current United States accounts receivable: Bushnell Holdings, Celestron, Hawke Sport Optics LLC, Meade Instruments Corp., and Olivon Mfg. Group Ltd. It otherwise denied the assignment request without prejudice, allowing Orion to seek assignment of additional accounts receivable if it identified more entities owing money to Ningbo Sunny.

The court rejected Ningbo Sunny’s other arguments against assignment. It concluded that the evidence concerning five entities addressed Ningbo Sunny’s arguments that importing goods did not show that money was owed and that Orion sought an impermissibly general assignment. Ningbo Sunny offered no evidence that those five entities were not United States companies, and the court found irrelevant its argument that some entities purchased goods other than telescopes.

Turnover request

California law allows a judgment creditor, after a writ of execution is issued, to seek an order requiring the judgment debtor to transfer property or documents showing ownership of property or a debt owed to the debtor. The creditor must show a need for that order.

Orion sought documents identifying payment rights covered by the assignment and asked that Ningbo Sunny turn them over to the United States marshal. Orion presented the request as an alternative to discovery, arguing that discovery might take months. The court held that the turnover statute is not a discovery provision. It also found that Orion had not shown a sufficient need because discovery had been served but responses were not yet due. The court denied the request for turnover and denied Orion’s request that Ningbo Sunny file with the court every payment right currently due within the United States.

Restraining-order application

Orion sought an immediate restraining order preventing Ningbo Sunny from removing the assigned United States accounts receivable. The court explained that California law permits a judgment creditor who has sought assignment to request an order preventing the judgment debtor from assigning or disposing of the payment right, but the creditor must show a need that is more than speculative.

The court found that Orion’s evidence was substantially the same as in an earlier restraining-order application, which had been denied because Orion had not shown that Ningbo Sunny planned to remove assets. Orion also relied on a letter from Celestron threatening legal action if Orion attempted to enforce the judgment against Celestron. The court found that the letter did not show that Ningbo Sunny was likely to transfer its United States accounts receivable abroad. The other evidence concerned the facts supporting the jury’s verdict and did not show a present need for a restraining order. The court denied the application without prejudice, stating that Orion could renew it if Ningbo Sunny took actions meeting the required threshold.

Disposition

The court granted the motion for assignment and turnover in part and denied it in part without prejudice. It ordered that the specified accounts, payment rights, contract rights, deposits, claims, and money due from the five named entities to Ningbo Sunny be assigned to Optronic up to the amount of the partial judgment entered in Optronic’s favor on December 5, 2019. The court denied the immediate restraining-order application without prejudice.